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Note:
This Section is Applicable on Both Public and Private Company.
A company can appoint Either Managing Director or Manager not both.
Tenure:
Appointment of Managing Director, Whole – Time Director or Manager shall not for a
term exceeding five years at a time.
Re-appointment:
The company may re-appointment them for next term before expiry of their present
term but not earlier than one year before expiry of the current term. This means,
company may re-appoint them for next term in last one year of current term.
DISQUALIFICATION FOR APPOINTMENT OF MD, MANAGER OR
MANAGER: No Company shall appoint or continue the employment of any
person as
Explanation:
Words used in this Section are “shall appoint or continue the employment of”. A
company may appoint a person on these positions, who has attained the age of 70
years. By passing a Special Resolution. The explanatory statement annexed to the
notice of such appointment shall justify such appointment.
CONDITIONS FOR APPOINTMENT OF MD, MANAGER OR WTD:
i. By passing of Resolution in Board Meeting ( BOD
decide Terns and Condition of such appointment) and
ii. Approval of Shareholders by passing Resolution in
Next General Meeting and
iii. Appointment should accordance with the Section- 197
and Schedule- V.
iv. If appointment is not accordance with the Schedule – V,
Central Government permission require.
Explanation: The NOTICE convening Board or General Meeting for such
appointmentshall include terms and conditions of such appointment,
remuneration payable and other matter including interests of directors in such
appointment.
*Subject to the provisions of this Act, where an appointment of a managing director,
whole-time director or manager is not approved by the company at a general
meeting, any act done by him before such approval shall not be deemed to be
invalid.
MANAGERIAL REMUNERATION:
Managerial remuneration is one of major corporate governance issue in India.
Promoters and controlling shareholders consider themselves owner of company and
get maximum remuneration. Difference between corporate tax rate and income tax
rate also priority to withdraw much money from “owned” company. Indian concept of
“owned company” and corporate governance has co – existence in last two decades.
Note:
There is No Restriction relating to managerial remuneration for a Private Company.
Explanation:
If company wants to pay remuneration exceeding 11%, can pay by approval of Share
holders in General Meeting with the Central Government Approval. (here only schedule-
V require to follow or we have to take approval of CG)
The Percentage aforesaid shall be exclusive of SITTING FEES paid under sub Section-
5.
Net profit for this section shall be computed as per method given in Section 198.
*In case of no profit or inadequate profit, the company shall pay remuneration to
directors, Managing Directors, Whole Time Directors and Managers in accordance
with Schedule V OR with previous approval of Central Government.
The remuneration payable to any director shall be determined either by articles of the
company or by resolution or by special resolution passed by the company where its
articles required for special resolution.
The remuneration payable to directors shall be inclusive of all remunerationpayable to
him for services rendered by him in any other capacity EXCEPT
Services rendered are of Professional In Nature and in opinion of Nomination and
Remuneration Committee or of Board of Directors as the case may be, director has
requisite qualification for practice of profession.
Sitting Fees to Directors:
Director may receive remuneration by way of fee for attending meetings of the Board or
committee thereof. The amount of such sum as may be decided by the Board of directors
thereof which shall not exceed one lakh rupees.
Provided that sitting fees to Independent Directors and Women Directors shall not be
less than the sitting fee payable to other directors.
Manner of Payment of Remuneration: Remuneration of Director or Manager may be
paid below mention ways
a) Monthly Payment
b) Specified Percentage Of Profit
c) Partly By One And Partly By Specified Percentage Of Profit
If any director receives directly or indirectly by way of remuneration any sum in excess
of prescribed limit, he shall refund such sum. Until refund, he will keep this sum in trust
for the company. Without Central Government permission, the company shall not waive
recovery of any such sum.
Every listed company shall disclose Ration of Remuneration Of Each Director To The
Median Employees’ remuneration and such other details as prescribed.
Where any insurance is taken by company for “Kay Managerial Personnel Liability
Insurance” Premium of such insurance shall not be included to the remuneration of any
key managerial personnel. However, if such person found guilty, such premium shall be
treated as part of their remuneration.
Any director, receiving commission from the company and Managing Director or Whole
Time Director may receive any remuneration or commission from holding company or
subsidiary company. This information shall be disclosed bycompany in the Board’s
Report.
SCHEDULE- V
Section 197 of the companied Act, 2013 in its sub section (3) and (11) say that in
case of no profit or inadequate profit, the company shall pay remuneration to
directors, Managing Directors, Whole Time Directors and Managers in accordance
with Schedule V OR with previous approval of Central Government.
Part- I of Schedule- V
A person should satisfy following conditions for appointment as managerial person:
100 crores and above but less than 250 crores 60 lakhs
250 crores and above 60 lakhs plus 0.01% of the effective capital in
excess of Rs. 250 crores:
*IF, SHAREHOLDERS PASSES SPECIAL RESOLUTION THIS LIMIT WILL BE
DOUBLE.
B. The managerial person who was Not A:
a) Security Holder holding Securities of the company of nominal value of
rupees five lakh or more or
b) An employee or
c) A director of the company or
d) Related to any director or promoter, at any time During The Two Years
Prior To His Appointment as a managerial person
2.5% OF THE CURRENT RELEVANT PROFIT
*IF, SHAREHOLDERS PASSES SPECIAL RESOLUTION THIS LIMIT WILL BE
DOUBLE.
CONDITIONS:
Posted Under
Category : Company Law (2932)
Type : Articles (10477)
Tags : Companies Act (1473) Companies Act 2013 (1223) Divesh Goyal (183)
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